Federal government legal spending hit record $500 million last year

Federal government departments and agencies spent a record half billion dollars on legal services last year, an increase of more than $138 million in the past three years alone, according to government spending records.

Total spending — not including legal services provided by a department or agency’s own lawyers — hit $500.8 million in 2011-12, according to the 2012 Public Accounts. That’s 6.8 per cent more than the previous year and 38 per cent higher than in 2008-09.

Indian Affairs and Northern Development was the biggest spender, racking up a legal tab of more than $110 million, though its spending actually fell by nearly $3 million from 2010-11. The Canada Revenue Agency was next at just under $70 million, followed by the Office of the Public Prosecutor, which spent $36.8 million to hire private-sector federal prosecutors.

The Department of Justice is by far the biggest provider of legal services to other federal departments and agencies. Its legal advice was valued at nearly $318 million last year. Other government departments and agencies provided legal services to others worth a further $23.6 million.

Payments to law firms accounted for most of the remaining nearly $160 million. Precise figures are elusive, however, because the Public Accounts only lists individual payments of $100,000 or more and in 2011-12, about $30 million in legal payments fell beneath that benchmark.

According to a Citizen analysis, two firms — Gowling Lafleur Henderson of Ottawa and Hughes Hubbard & Reed of New York — each earned more than $14 million from federal government legal work last year. Gowlings did almost all its work for Public Works and Government Services, while Hughes Hubbard & Reed provided legal services mostly to Foreign Affairs and International Trade.

Altogether, eight law firms billed more than $2 million for legal services last year, with 33 billing $500,000 or more. Legal spending was spread among hundreds of different firms, with few doing work for multiple departments and agencies. Among the top-10 billing firms, for example, five did work for just a single department, four had two clients and the other did legal work for three different departments.

Government payments to law firms have risen sharply since the Conservatives came to power in 2006. In 2006-07, law firms collected about $90 million from federal departments and agencies. Two years later, that had risen by nearly 50 per cent to about $134 million, records show. Since 2008-09, payments to law firms have grown by a further 19 per cent.

But legal services provided by the Department of Justice have been expanding even more rapidly, the Citizen analysis reveals. In 2008-09, the department’s lawyers provided legal services valued at $205 million to other departments and agencies. By 2011-12, that had ballooned by an additional $113 million.

In an email, Carole Saindon, a spokeswoman for the Department of Justice, said demand for legal services has been driven by “a variety of factors over which the government has either little control or limited influence.”

At any given time, Saindon said, the federal government is involved in about 50,000 litigation files, about 85 per cent of which it did not initiate. In such cases, she said, the government “has little opportunity to control the demand for legal services, as it must defend the application of the laws and regulations of Canada.”

Factors driving demand for legal services include an increased reliance on the courts to resolve disputes, the broad application of the Charter of Rights and Freedoms, the growth of tribunals that can review government conduct and decisions, and the creation of new judicial processes, such as class-action lawsuits, Saindon said.

In addition, emerging security issues affecting Canada’s international trade and law enforcement capacity — including security certificates, identity management and information sharing pressures — have had a “significant impact” on legal requirements in government, she said.

Prior to 2007-08, most departments and agencies didn’t include legal services provided by the Department of Justice in their tally of legal expenses. Consequently, the true cost of government legal services was grossly understated in the Public Accounts, hovering around the $100 million mark as late as 2006-07.

Once all Department of Justice legal services were fully reported, the cost of legal services nearly quadrupled in the 2008 Public Accounts, inflated in part by payments of more than $110 million for legal services by the Office of Indian Residential Schools Resolution of Canada.

The office, established to resolve thousands of lawsuits filed by former residential schools students, was folded into the Department of Indian Affairs and Northern Development in 2008. But the work of resolving the lawsuits continues, and has been driving up the department’s legal costs ever since.

While Indian Affairs is an extreme example, most departmental and agency spending on legal services has risen — sometimes dramatically — in the past three years, the Citizen analysis found.

The Canada Revenue Agency, for example, spent about $27 million more for legal services last year than it did in 2008-09 — an increase of 63 per cent. During the same period, Citizenship and Immigration Canada’s spending on legal services catapulted from $417,596 to almost $12 million, a near 28-fold increase.

Spending on legal services at Indian Affairs has risen by $32 million in the past three years, and legal spending by National Defence and the Royal Canadian Mounted Police has doubled. Legal spending is up 116 per cent at Finance and by nearly 90 per cent at Treasury Board since 2008-09.